Gilead Sciences, Inc. (GILD) Earnings Call Transcript & Summary

[Audio Gap] America and excited to have Gilead with us today, specifically Johanna, Mercier who serves as the company's Chief Commercialization Officer, overseeing the global commercialization of the company's medicines across really all areas. She's been with the company since 2019. Prior to Gilead, I think, 25 years of Bristol-Myers, so quite a long time senior leadership roles there in both U.S. and international markets. So we will start, of course, with some macro questions, which she'll love to answer. So high-level question just to begin with, which is New headlines every day, it seems like MSM most recently, tariffs prior to that, IRA possibly changing. Is that impacting the day-to-day operations at Gilead? Are you guys doing anything differently, hiring freezes, M&A on hold, anything like that? Are you just plowing ahead as if it were 6 months ago or 12 months ago?

Maybe in the middle of that. I would say that we're incredibly focused on delivering on our strategy. That's both the top line and delivering the growth in the top line, making sure we're incredibly well disciplined on our OpEx and then, of course, driving the pipeline. So that's been the focus. We have a small team that actually, of course, manages scenario plannings and like I'm sure you all do, different scenarios of what's playing out. But there's very little we know today, right, from a specific standpoint as to what, how, when, et cetera. And so it's hard to manage a little bit in this fluid environment. But that's why we need the teams, the major -- majority of our teams to stay incredibly focused on what they need to deliver. I also think that you mentioned field force or freezes or BD. It hasn't changed our strategy at all from that perspective. We believe that we need to continue to drive science. We need to continue to -- we have a lot of launches in play. We have Livdelzi that just launched last August. So that's obviously still in launch mode. We have lenacapavir for prevention that we're very excited about with the June 19 PDUFA date around the corner and tracking towards that. We also have anito-cel data coming through at the end of the year. We just got ASCENT-04 positive data, expecting ASCENT-03 shortly to move us in first-line triple-negative breast cancer. So a lot of pieces in play and well positioned to move forward. Having said that, of course, there is uncertainties, and we just need to make sure we're best prepared. And we believe we're probably a little better prepared than others in light of the fact that our average effective tax rate is about 20% for the last 4 years. It's related to the fact that majority of our IP sits in the U.S. So we're already kind of at a good place there versus some of our peers. And as it relates to transfer pricing, obviously, less of an impact in light of that. And so we're tracking everything closely like you all are, and we'll navigate it as it comes, right, as we get more details as it plays out.

Outside of a venue like this, we're people like me are pestering you with these questions. Are you spending any of your time when you're back at Gilead on these matters?

For myself.

Yes, yourself. First, you're part of the executive committee. So is it all hands on deck where you are spending some portion of your time thinking through scenarios. MSM is -- I mean, who better able to answer those questions than you had a commercial. This is drug pricing issue.

Yes. So of course, we're talking it through. But it's hard to talk about how this plays out because there are so many permutations of it. And so I think it's more about just making sure that as we move forward, we're conscious of potential eventualities, right? As we think about value of our medicines as we think about how we represent, how we move forward on launches and thinking through a little bit also what potential consequences, unintended maybe consequences play out from some of these decisions, whether it's funding cuts or anything else. And so we are thinking that through. And yes, of course, I do spend a little bit of my time. But again, with a very small team. And I think it's really important because the -- if you get everybody on board with you on this journey, then people that need to do their day-to-day job aren't thinking that through. So I think the focus piece is critical for us to be successful. And that's why it's a very small team of experts that are coming together and just planning out like we did with the IRA. Prior to IRA, Part D redesign, et cetera, just making sure that there was a small team thinking through what does that mean? And what are the questions we need to ask, maybe differently than we did maybe 5 years ago as we think about BD deals, as we think about development programs, et cetera. So that is something that I'm part of.

So when Trump held his press conference, was that yesterday, he talked about equalization, right? So kind of making prices ex-U.S. closer to what they are in the U.S. And part of that is raising prices ex-U.S. And I can't figure out how that would possibly work, whether it's drug companies trying to pull that lever or the U.S. government trying to pull that lever. Would you agree? Who can make prices in the ex-U.S. countries go up?

I think, listen, some of the ideas that have been floated, I think, will be challenging. There's no doubt, especially for products on the market today. I also believe that maybe as they are thinking about a percentage of their GDP and having those discussions with other countries, that's where the U.S. administration might have a little bit more traction. So we'll see how it plays out. But at this point in time, it's hard to see a clear path.

Yes. Okay. So we published a piece this morning where we ran scenario for all of our companies that if you cut government programs in the U.S. by 20% and float it through the P&L, what would be the earnings impact? And the earnings impact in Gilead was kind of in the middle of the group, frankly. it's -- as I try to convey, I know, it's kind of an impossible exercise because it's hard to even know what net pricing is in the U.S. So we can usually guess. Ex the U.S., we have no visibility because those usually are peers that have kept confidential agreements between manufacturer and the different countries. So I'll ask you a question, and I can predict how you'll probably answer it. What can you say about net pricing in the U.S. relative to net pricing in countries like EU5, for example?

Yes. What I can say is this. We believe in value of our medicines and the science and the unmet need that it serves. And so we make sure that as we move forward and what we've always done in the past, this is no different than what we've done in the past, is making sure that value comes through. And we do that in the U.S., and we do that ex-U.S. as well. I mean the only piece that I would add is the difference would be in low middle-income countries and the work we've done with HIV and hep C and hep B, that's very different because that's really countries that can't afford to have access. But we believe in innovation. We believe in making sure we get value for our innovation, and we believe access is really important because there's no point innovating if you can't make sure that the people who should have access to these medicines do.

One last question on MSM. So just play this scenario forward. So let's say we're right and you have to lower prices across Medicare Part D, Medicare Part B and Medicaid. Would that have any sort of spillover into the commercial side? Let's say, commercial is left alone by Trump, left alone by MSM, but functionally, we're being spill over to the commercial side.

I mean it's too early at this point to even speculate about that. But I will say this, leverage a little bit the work that's been done with the IRA and Part D redesign and whatnot. And we're not seeing any of that spillover at this point. So that's the way I would probably think that through. But yes, I mean, this is something we'd have to play out a little bit, but the details are going to be important here.

Isn't Medicaid a good example of how it doesn't spillover because Medicaid is a price mechanism? They get drugs much cheaper.

It's another example.

And as much as commercial guys would love those prices, they don't have access to it. They can't force you to price it at that level. So even if Medicare went the way of Medicaid, is it really going to spill over to commercial?

Yes. So I think the example that you just gave, the example of the IRA and some of the drugs that have already been impacted by the IRA or other examples that it's 2 separate pieces of business.

Okay. So let's talk about HIV. So this is your biggest book of business. It's really a solid 2/3 of Gilead's total revenues. And I guess, starting again with the policy question. There is certainly change of price cut at the CDC, HHS, reorganization of FDA. And there's a big -- Medicaid is a big channel, right, big payer channel for HIV. And the CDC does things like surveillance for patients in hotspots of HIV infection. So what does this mean to Gilead? Are you seeing any consequence? Or do you expect that if these cuts actually go through and the loss of personnel, which is already happening that, that could actually impact the business in 2025?

Yes. So what we're seeing thus far is still more a pause than cuts. And they need to go through Congress, obviously, to get enacted. I think the role that we have to play is making sure we're educating a lot of these lawmakers to make sure they understand the need and what the CDC was doing because I think you're referring to a lot of the funding cuts there. The funding cuts, just remember, though, they have nothing to do with the prescription. They're screening, diagnosis, surveillance, specific to HIV. So I do think it's important to educate and make clear the need of that, how important it is, specifically if you think about surveillance, making sure you get. If there's an epidemic that happens that you get control of it as quickly as possible before it expands across the country. All of those things are learnings from the past that we need -- which is why these pieces in CDC existed to begin with. I think from a screening diagnosis work that the CDC did was very important. There's also a lot of work that Gilead does in this space. And we're very targeted in our approach on this front where HIV incident is the highest risk, et cetera. We do a lot of screening. We do a lot of diagnosis and linkage to care, which I think is really important because, as you know, in HIV treatment, you still have about 40% of the population that are not virologically suppressed. If you're not virologically suppressed, you are transmissible. And so -- and those people include people that haven't been screened, right? Don't know they have HIV, have been screened, diagnosed, but not on treatment. Are on treatment but are on older legacy drugs and are not virologically suppressed appropriately. So all of that is a real from an HIV treatment standpoint, important for us to make sure that we continue to create the screening diagnosis and linkage to care to bring them into the marketplace. I think that's really important for us as an agent.

So if these cuts actually go through, it sounds like it's the sort of thing Gilead could I mean possibly spend more and pick up the slack and do its own.

Yes, I don't think we're going to cover what the government was doing. I think we're going to continue doing what we've been doing, making sure that we can help the populations that need it.

And then if you could talk about treatment versus PrEP, so treatment if you have an infection versus PrEP versus prevention, thinking through the same cuts, are they more likely to impact 1 or the other treatment versus PrEP?

Not really. I mean the cuts were really in -- were in the treatment setting because it was screening diagnosis. Prevention is obviously incredibly important. It's a market that's been growing at about 16 points or so year-on-year. It is one that HHS has supported as well for preventative services -- through preventative services. It's 1 that the current administration talks a lot about how prevention is key. And if you think about it, as we think about prevention, if you increase prevention by even 25%, you're reducing new HIV cases by 50%. So from a cost containment standpoint, it's a really interesting proposal for the government because you've reduced cost in the long term. So those are all pieces that we believe prevention is important. The work that we do there is more about awareness and education for people at risk. And a lot of people don't even know prevention exists. And making sure that we get to the people where the highest risk exists. And that's usually -- generally speaking, it's not the major cities, it's more rural cities. It's the southern belt of the U.S. That's where HIV incidence is the highest and where people really need to understand how to protect themselves.

Okay. Let's shift to some specific products. So lots of focus on lenacapavir. We'll get to you saw it on quarterly results, a lot of questions.

Yes.

And in other venues, it tends to be maybe the biggest proof of point.

It's upcoming, right? It's a super exciting launch. It's transformational for prevention. We think we're going to redefine HIV prevention completely with something that's every 6 months. And the data that we've shown with PURPOSE 1 and PURPOSE 2, over 9,000 people in that study, really looking at incredible data, 100% efficacy in the PURPOSE 1 trial and just over 96% in PURPOSE 2, never been seen before. And that's really linked to the frequency of dosing.

Yes. So there's a lot of focus on the upcoming launch, right? It should be probably somewhere if everything stays on track.

June 19th, PDUFA date.

June 19th, you guys will launch soon thereafter presumably. Access in the U.S. in terms of getting payer coverage, do you guys expect any sort of hurdles? I know you've set out some parameters before, but maybe you can just recapitulate those?

Yes. From an access standpoint, it's in line with other launches, right? As you start, you're working through with the plans to make sure you bring them up to date. We've already started working, but obviously at launch is when you really activate that. And what we've said is we believe that probably by the 6-month mark, we should be at about 75% access or so and then about 90%-or-so by 12 months. And so you'll see a ramp as you go forward. At launch, obviously, you're going to go through medical exceptions just like you do with other launches like we've done with Livdelzi and you'll build the access through the different plans as we go forward. We do believe that there's real value here. I think the plans are also pretty clear that they have been giving unrestricted access. For example, for Descovy, we're at about over 80%, 85% unrestricted access despite the fact that there are generics in the marketplace. We believe, over time, the same thing will play out for lenacapavir.

So out of the gates, 75% access.

6 months.

6 months.

Not out of the gate.

Just out of the gate is defining that as a 6-month window. So in 6 months, 75%, you're saying that would likely be unrestricted right? No edits.

Yes.

Okay. And so buy and bill rate, this is a semi-unique product. Glaxo's there right now with Apretude and with CABENUVA for treatment. It's not really what HIV docs are used to in terms of we buy the drug and then we give to the patient, now we bill it and we make a small spread. So that is different, right? And there's a big question about, is that an impediment towards the uptake? Now, I think, as you and I have talked about before, you don't have to do buy and bill.

Exactly.

You can do other things of size buy and bill to use those products. So do you want to kind of describe what the options are?

Yes. So I think we've been really over the last, I would say, 24 months or so digging into understanding what are the impediments, what are the challenges in the past for long-acting injectable in this area. And from that understanding, it's been clear that a lot of these clinics and providers have never done buy and bill, to your point. And so the opportunity is to make sure we're flexible for them. And so we're giving them optionality. We believe that many folks, especially at the beginning, will probably prefer going through a specialty pharmacy. And so what that means is they'll do white bagging. So they'll write a script. The script will go to the specialty pharmacy. Specialty pharmacy will do all the reimbursement work up, get it through the system and then send back the product to the office for the providers to inject their patient. That's the white bagging process. Others will say, "I don't want to do anything. All I want to do is write the script. Great. Write the script, you'll have an alternate site of care where the specialty pharmacy will still do all the reimbursement work, we'll send it to the alternate site of care, and that's where the patient will get their injection. And then you have some that has started doing buy and bill. There are few and far between, but there are some. And I think those clinics and providers, they're bigger clinics usually will be very open to doing buy and bill and they'll be able to do it with a miscellaneous J code at first, and then, of course, we'll get the J code down the road and carry on from that. So we're assuming that probably at launch, probably it's more like a 75-25, 70-30 kind of split of white bagging to buy and bill. And over time, we do believe to your point that as volume increases for lenacapavir, that there might be clinics that decide they want to invest in buy and bill, because it's an investment, right? You need to bring in people, do all the reimbursement work and then, of course, store product, pay for it out front and then get reimbursed for it. So there's an out-of-pocket cost for clinics. And so I do think that's when volume will kind of play out over time, and that's when you might see a little bit more buy and bill lift. But we'll be ready for it all. And I think that flexibility and optionality will create a seamless customer experience because that's what we're all about.

And then how much of a play is there here on alternate sites of distribution, meaning where you can actually get your injection? You and I both live in California and Safeway near me, you can go there and get your COVID shot, you can get your bloods drawn. You don't have to go see a physician. So why can't that be a channel for a product like this?

Yes. So we're looking into that. Not all pharmacies can do that because there's -- there are specifics to this. You need privacy, you need, right? You think about HIV prevention. And so -- and we want to make sure that people are trained for the injection as well. This is a subcutaneous objection. But we also need to make sure that we're providing that training prior to that first injection, just to make sure there's a great customer experience as well. So we are looking at, to your point, Walmart, CVS, et cetera. We're also looking through telehealth because a lot of people do prep through telehealth, making sure telehealth has -- some telehealth providers have brick-and-mortar offices where they can do the injection, others will use alternate sites of care, 1 medical right, for example, as well as we think about California. All of those pieces are kind of coming into play to make sure that launch, there's optionality. So yes, absolutely. All those things have been thought through.

And will those start to actually materialize those alternative sites in the current year in 2025?

Access works up, I think that's when that will play out as well.

And do you know is Apretude, Glaxo product being given in any of those channels to know?

I think you'd have to ask that I think at launch, they were not.

Okay. So let's talk about that Glaxo product because I imagine you guys have looked at the launch experience there, and it hasn't done very well is on fairly slow. I think there's some really obvious reasons for that. But what -- how do you guys view that as a benchmark?

Yes. So we've looked at a lot of the different -- we've looked at, obviously, current in-market prevention competitors, and we've also looked at out of market where you went from an oral to an injectable. And there's different markets that apply to that just to get the best learnings for us to prepare for this launch. A lot of learnings were in this marketplace specifically. Frequency of dosing is really important. And the why behind that is to go into a clinic every couple of months versus every 6 months where they're already kind of going every 6 months anyway for SDI testing or sometimes even every 3 months, you're adding a lot of burden of number of hours of patients coming back in into that clinic. So a lot of the smaller clinics can support that. So that's one. Two is, I think at launch, there wasn't much flexibility. I think there was a real misunderstanding that maybe people will just pick up buy and bill right away. And kind of move forward with that because there was maybe a financial incentive for clinics to do that. So I think that was misunderstood a little bit, and I think that's where the flexibility and the optionality that I described earlier is so important to our launch. And then just the value of the product itself. If you think about the differentiation of lenacapavir, I talked about every 6 months, but let's talk efficacy, right? We are talking about incredible efficacy. Of course, it's linked to adherence that it offers. But any research we've done in prevention, it is clear. It's different in treatment. It's a little bit more balanced. But in prevention, it is super clear that less is more. And so less frequency. These aren't people that are sick. These are people that just want to make sure they protect themselves from getting HIV in the future. And so it's about empowering them to own their sexual health. So that's the piece that we need to focus on. And I do think every 6 months is going to be a real differentiator to redefine HIV prevention. And that's why we believe this is such an important launch for Gilead.

Pricing benchmark, my guess is you have those clearly established as namely Descovy, your own product that runs around $25,000 a year. Is that the right way to think about it?

So we haven't discussed pricing yet as we don't have approval. But what we are thinking is, as you think about an annual treatment cost of prevention being in the range of anywhere between 24,000, 26,000 currently for branded products. We are thinking to be in line with that range and making sure at the same time that the value of lenacapavir, the differentiation that we're bringing to market gets recognized as well.

There already is hyper-focused on what's the first quarter of launch sales going to look like second quarter. And 1 of the unique things about this product is every patient that gets dosed initially has kind of 6 months' worth of revenue recognition upfront by Gilead. So you'll be largely cannibalizing Descovy, right? You'll be taking share invariably from Glaxo product, you'll be helping to grow the market. But that dynamic of every script being worth 6 months of revenues could actually be meaningful, right?

Especially if you're thinking about a script in December, right? Of course, later in the year, a greater value in that year time frame in the 6 months of launch. The -- I would say a couple of things. One is the market today is about 95% daily orals and 5% long-acting injectable. We believe the market at launch, this strategy is going to be a switch strategy. And so it's existing people on prep moving over, whether it's from Descovy, Truvada generics or the long-acting. We think there's real value proposition there for lenacapavir. So yes, and when you think about -- we talked a little bit about annual -- at a high level annual cost of treatment. When you think about adherence of current daily orals, in real-world data, the current daily oral is used maybe 50%, 55% adherence because people don't remember to take a pill every single day when they're not sick. And so that also creates risk, right, from an efficacy standpoint. As you think about something like lenacapavir, which is every 6 months, your darn shoots right up. And so when you think about annual treatment revenues, that's also very different, right? You're thinking potentially half for a daily oral versus something like lenacapavir every 6 months. So that's also an advantage as we think that through. So definitely switch at launch and obviously, the newer people and there's -- we believe anecdotally, we've heard a lot of people kind of waiting for something every 6 months. And so excitement about the launch is kind of ramping up as we speak. The other piece of the puzzle is, of course, then expansion. We believe there's a real opportunity for a lot of folks that are currently not educated, aware, on prep today to actually bring them in. And that means, as I think about block Latino MSMs, I think about black women, I think about younger folks as well because that's usually where you see the highest risk of HIV incidents, making sure we get to those folks where they are is going to be really important. So that's kind of the phase of expansion that's going to come through. In parallel with the switch strategy, but probably you won't see that really come through until a little later out 18, 24 months out, because it's going to be a little tougher. We've done a lot of ethnographic research, geo mapping to find out where these people are, where do they go? Do they -- which doctor do they go to? Do they go to a doctor where we get to them through churches, community groups, et cetera. And the cultural stigma aspect is strong here. So this is something we're very well aware of and making sure we address that appropriately. But we believe that there is a real expansion strategy in the U.S., let alone ex U.S. geographies to make sure prevention is much more widely used to protect from HIV.

All right. Let's talk about Biktarvy. There's a lot of folks on lenacapavir is really what drives the P&L. So $14 billion this year, that's at least what we forecast nearly 50% of revenues of the whole company. The share in the integrase inhibitor market now for you guys is, I think, just over 50% and just continues to motor up. So when I launch here at BofA with a bio Gilead, 1 of the reasons was, I think consensus is under modeling Biktarvy. When I look forward over 5 and 6 to 7 years. So you're hitting an air pocket this year because of Part D redesign, -- last 2 years, you grew in the teens, 3 years ago, you're 20-some percent -- why can't that sharp penetration just continue almost linearly like it is and just continue to carry this product at a very strong trajectory. We get past 2025 Part D resign, annualized then we're kind of back off to the races, right?

So you can come talk to my team because I'm in agreement with you, right? I think that as we've talked about Biktarvy growth. And you've seen it even just recently with the Q1 earnings call, we talked about 7% year-on-year growth. And that's with Part D be designed. So that's a couple of points just of Part D applied to that. And so we're at over 51% share and growing. We are outpacing our competitors that have been out there more recently than us. We've been out since 2018, and we continue to deliver. There are many markets around the world that are over 50% share. Most markets, Biktarvy is, number one, it has set the standard of care for all. And we believe there's still a lot of room for growth here. So absolutely. We also believe that our LOE is out until late 2033. So we have a large and long runway. And remember when I said that the market in treatment is a little different than in prevention when it comes to long actings. As much as long actings are well underway and will come through and many of those are actually at Gilead, we believe, in patient centricity. We've looked at the market, and we think that from a very definite prevention, the daily orals will have a really critical role continuing to play. You have a lot of people that have been diagnosed with HIV and want to know they're doing something about it every single day. And then you have the other extreme that don't want to be reminded that they have HIV. And that's where long actings will come out. We have over 9 HIV launches across treatment and prevention that are going to play out prior to 2033. So a lot more to come. But I do believe there's still opportunity for growth with Biktarvy and of course, then we're going to launch the first oral weekly with len-islatravir, followed by an integrated combination in the oral weekly as well, let alone 3, 6 months, et cetera coming through. So there's a lot more to come. So I would think about Biktarvy as definitely still the standard of care in the daily oral market with an expansion with the long-actings as well. So more room for growth. Let alone the fact and I'm going to bring us back to what I said earlier around HIV, you still have a lot of people out there that are not currently virologically suppressed. And that's the opportunity. So the market grows at about 2 to 3 points year-on-year, and it's been quite consistent. There's a lot more work to be done to get a lot of linkage to care to those people that are not currently virologically suppressed. That's the opportunity from a growth standpoint when you think about HIV treatment.

Great. Okay. So the light's flashing. I think we're done. Johanna, thanks so much for joining us today.

Appreciate all the time.